Understanding CGT vs. CWT in Real Estate Transactions

When selling or buying property in the Philippines, it’s essential to understand the key differences between Capital Gains Tax (CGT) and Creditable Withholding Tax (CWT). Both taxes impact property transactions, and knowing how they apply can help you make informed financial decisions.

What is Capital Gains Tax (CGT)?

Capital Gains Tax is a tax imposed on the sale of a capital asset, including real estate. According to the Real Estate Law & Regulations in the Philippines, the CGT rate is 6% of the gross selling price or fair market value, whichever is higher.

Who Pays CGT?

The seller is responsible for paying CGT. This tax applies to sales involving non-dealer transactions, meaning individual property owners selling assets.

What is Creditable Withholding Tax (CWT)?

Unlike CGT, the Creditable Withholding Tax (CWT) applies to real estate sales by corporations or businesses engaged in real estate. The rates vary depending on the seller’s classification:

**1.5%** for sales not exceeding ₱500,000
**3%** for sales between ₱500,000 and ₱2,000,000
**5%** for sales exceeding ₱2,000,000

Who Pays CWT?

Unlike CGT, which the seller pays, CWT is deducted by the buyer from the selling price and remitted to the Bureau of Internal Revenue (BIR).

CGT vs. CWT: Key Differences

Aspect	Capital Gains Tax (CGT)	Creditable Withholding Tax (CWT)
Applicable To	Individuals selling real estate	Corporations & businesses in real estate
Tax Rate	6% of the selling price or market value	1.5% – 5% depending on sale value
Payer	Seller	Buyer (Withheld & remitted to BIR)

When & How to Pay CGT or CWT

CGT should be paid within 30 days after the notarization of the Deed of Absolute Sale. For CWT, the buyer must remit the amount to the BIR within the same period.

Steps to Paying CGT or CWT

Secure a Deed of Sale for the transaction.
Compute the CGT or CWT amount based on the sale price.
File the tax payment through the BIR online platform or at an authorized bank.
Obtain the Certificate Authorizing Registration (CAR) as proof of payment.

Why Understanding These Taxes is Crucial

Failure to comply with tax obligations can lead to penalties, delays in title transfer, and legal complications. It’s highly recommended that sellers and buyers consult a professional or refer to the latest updates in Real Estate Tax Updates.

Final Thoughts

Understanding CGT and CWT is essential for smooth real estate transactions. Whether you’re a first-time seller or an investor, knowing the applicable tax obligations will save you time and money.

Looking to sell your property? Make sure you’re prepared with our Seller’s Guides & Tips.

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